Why do we find so much Fear and Loathing at the Airport?
One of the big reasons flying is so miserable is because airlines schedule more flights at desirable times than airports can handle — much as they sell seats to more passengers than their planes can hold. On a typical Tuesday morning in August at New York’s John F. Kennedy International, the airport has enough capacity for around 44 departures between 8 and 9 a.m. But airlines schedule 57, guaranteeing delays, even under perfect conditions.The carriers are well aware that their commitments to travelers are often impossible to keep, but they make them anyway because they like to give passengers what they want. And everyone prefers to fly in the morning or early evening so they can get in a day of work or play on the day they fly. “We don’t schedule flights at one o’clock in the morning because people don’t want to travel at that time,” says Peter McDonald, chief operating officer of UAL Corp.
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In the short term, the most effective way to solve the congestion problem would be for Congress to authorize auctioning off the right to fly into overburdened airports — a move that would allow the FAA to limit the number of takeoffs. The rights could expire every few years, opening up the market to competitors, while the money raised could pay for airport improvements. Underbidders could schedule more flights at smaller, less crowded airports or at off hours. “If we auctioned off the space at the 10 worst airports, it would go a long way towards fixing the national problem,” says George Donohue, a former FAA official who now teaches engineering at George Mason University.But the airline industry, which is just now getting back on its feet after a horrible few years of losses, layoffs, bankruptcies, and restructurings, opposes the idea. Auctions would raise costs for the carriers, who have fought their way back to solvency by economizing on customer service. It is now considered unlikely that Congress, which took away the federal bureaucratic authority over routes and pricing when it deregulated the airline industry in 1978, will consider the auction proposal this year. “If you can’t deal with scheduling,” observes former Transportation Dept. inspector general Ken Mead, “you don’t have as much authority as people think.”
As George Donohue, the former FAA official, points out, auctioning off space would fix much of the problem. It’s yet another example of a tragedy of the commons. Each airline wants to schedule as many flights as possible during prime flying times, but an airline does not pay for using up scarce prime-time space.
The article asserts that auctions would raise costs for carriers — and they would, if they stopped there — but the carriers could easily be given credit for the space they’re already using, so that the auctions end up revenue-neutral overall.
Also, it’s a shame that the article notes that carriers “sell seats to more passengers than their planes can hold” without explaining why. It’s not simply because the airlines are evil. Air fares aren’t fair — or don’t seem that way — because, unlike most tangible goods you buy, a flight has very high fixed costs and very low variable costs. Virginia Postrel explains:
The essential problem is matching capacity with demand, which requires making spending decisions far in advance of ticket sales. That may not sound unusual — many businesses have to guess how much product to make — but the problem is harder for airlines than for manufacturers. If they plan for too many passengers, they can’t carry the extra seats in inventory.“Either you sell the seat for this particular flight for this hour or you don’t sell it,” said Pablo Spiller, an economist at the Haas School of Business at the University of California at Berkeley. “You can’t say, ‘I’ll keep the Thursday, Oct. 4, seat at 5 for next week.’ No, it went away, that seat.”
If planes fly with few passengers because an airline overestimated demand, those flights tend to lose money. For a given flight, the costs of fuel, labor and the aircraft itself are essentially fixed, regardless of how many passengers the plane is carrying. That’s why the airline’s “load factor,” the percentage of seats filled, is such an important indicator of how well it is doing.
When the load factor drops, airlines tend to get into fare wars. Adding another passenger to a given flight costs almost nothing, so any additional revenue will help cover those fixed costs. If one airline has too much capacity, it will sharply reduce fares to fill up its planes. Competitors will drop their fares to match, lest they lose their passengers.